This blog post is made up of excerpts from ERI’s January 2021 National Compensation Forecast. For a more in-depth look at ERI’s salary projections, download the white paper here.
Each quarter, ERI examines the rates at which salaries have increased and provides guidance on expected increase for the upcoming year. These rates are calculated using ERI’s Salary Assessor and ERI’s Salary Increase Survey & Forecast.
Actual compensation movement in the fourth quarter of 2020 (published January 1, 2021) saw an increase in compensation growth over the October data release, which showed a sharp decline. This is a reversal of the slowing trend we have seen over the past several quarters. Specifically, compensation growth declined in April, July, and October, likely due to the current COVID-19 outbreak.
These growth rates were 0.73% (January 2020), 0.61% (April 2020), 0.59% (July 2020), 0.45% (October 2020), and 0.62% (January 2021). Based on these quarterly rates, it is possible that compensation growth has started to recover after the recent economic shock.
January salaries have increased by 0.62% over the October 1 data release (see Table 1). This rate of growth is above the expected quarterly rate of 0.55% and the October increase of 0.45%. To put this into context, the average quarterly growth over the past 20 years has been 0.65% (see Table 2). Over the same 20-year period, the average January increase has been 0.59%. Over the past 20 years, January increases have been lower than increases throughout the rest of the year, though growth in the most recent quarter is higher than the previous three quarters.
The current quarter breaks with the decreasing growth trend seen since January 2020, likely due to the COVID-19 pandemic: 0.73% (January 2020), 0.61% (April 2020), 0.59% (July 2020), and 0.45% (October 2020). The average quarterly growth rate of the past four quarters (0.57%) is slightly higher than the new growth projection of 0.55%.
Taken together, the Salary Assessor growth figures and Coronavirus Compensation Survey results appear to indicate an improvement in the compensation landscape from the summer. However, the rotation away from uncertainty and reductions in the summer does not fully indicate a recovery.
More organizations are slowing growth and freezing pay. Also, while the January Salary Assessor growth rates are stronger than October, the growth is not even. Growth over the past year was led by Sales with increases of 1.9%. In contrast, IT employees grew at a rate of 0.7% over a full year. In sum, compensation trends appear to be increasing, but we are not out of the woods yet.
Download ERI’s National Compensation Forecast – January 2021 white paper for a deeper dive into salary data by year, mean salary by category, and forecasts into 2021.
